Credit Crunch vs Oil & Gas

🪓 Credit Crunch vs. Oil & Gas

If “uncertainty” characterized how oil and gas firms feel about the last two weeks of banking turmoil, Wednesday’s Fed comments about a probable credit crunch likely inched the mindset closer to “brace for impact.” 

Banks typically lean on one another to secure funding, but an increasing number of cash-short banks are stepping into the queue for the Fed’s discount window – a ‘last resort’ pool of financing. Additionally, over the past week, we’ve seen a rise in inter-bank margins.

For survival’s sake, these banks are adopting a new modus operandi of stinginess. With tighter loan conditions, the riskiest borrowers are the first to hit the chopping block. In previous ‘credit crunches,’ that included plenty of fracking operations. 

Constrained debt means oil and gas firms must decide which investments fit into a survivable ‘debt diet’ and what categories are worth trimming. 

In the long term, crude and natural gas volumes might take a hit. In the near-term, climate-focused initiatives like reducing methane leaks probably won’t make the cut. 

🔋 US EV Chargers: Fortune Favors Prepared

Last month, the Department of Transportation released its requirements for accessing funds from the $7.5 billion national EV charger network. 

The rules stipulate that chargers must immediately use standardized CCS ports, use standardized payment options, be assembled in the US, and, by 2024, have 55% of their cost coming from US-made components.

In the race for market share, the immediate US assembly requirements caught most manufacturers flat-footed. 

Many EV charger manufacturers were holding out for waivers on assembly requirements until 2024, similar to the deferred timeline for sourcing requirements. 

But companies that invested in American facilities before the announcement, of which Tesla is the most dominant, earned a welcomed headstart.  

Now, Tesla is poised to push further ahead of competitors. The company already controls 60% of the nation’s 30,000 fast chargers, and it recently announced changes to its proprietary Supercharger network that will enable access to non-Tesla EVs as well. The firm’s Buffalo, New York, charger factory already meets the requirements for federal funding. 

Meanwhile, competitors like EVgo and XCharge that assemble charging stations overseas or are in the middle of building American facilities are scrambling to get back on track. 

Other Shots:

🏭 Choosing Reliability Over Emissions

Last year’s boom in natural gas demand ended almost as quickly as it began, but its impact on energy stacks is far from fleeting. 

When prices shell-shocked countries that rely on gas-powered electricity generation, many elected to boot up coal plants – a boon for reliability but a bust for emissions targets. Despite plummeting natural gas prices after a warm winter, demand for the fuel remains lukewarm. 

Before last year’s energy crisis, coal appeared to be on its way out the door. Now, countries like China and India are perfect examples of prioritizing stability. Investments in new coal power plants are rising. 

Countries like China are inclined to slow their gas demand growth to a few percentage points until global supplies can accommodate Europe’s transition away from Russia. 

🚢 Ghost Shipping, Real Consequences

Sanctions on oil-producing nations like Russia, Iran, and Venezuela are growing the number of cargo vessels in ‘shadow fleets’ worldwide. Suppliers typically opt for older, less vetted tankers to bypass economic penalties and prop up exports. Some estimates place the number of vessels at nearly 20% of the world’s 2,200+ global tanker fleet and rising. 

One unintended consequence of these sanctions: the number of groundings, collisions, and related incidences last year exceeded the previous three years combined.